BABA - Read This Before Selling All Your U.S.-Listed Chinese Stocks
The U.S. Senate recently passed a bill that could cause many Chinese companies to delist their stocks from American exchanges. The bill requires companies to certify they're not "owned or controlled by a foreign government," and requires the Securities and Exchange Commission to bar companies that haven't opened their books to the Public Company Accounting Oversight Board (PCAOB) for three consecutive years.
The PCAOB is a non-profit watchdog that oversees the audits of public companies. Unlike most foreign companies that list in the U.S., Chinese companies don't allow the PCAOB to oversee their audits. The bill still needs to pass a House vote and be signed into law by President Trump, but it currently enjoys bipartisan support.
The unexpected passage of the Senate bill raises red flags for investors in U.S.-listed Chinese stocks like Baidu (NASDAQ: BIDU), Alibaba (NYSE: BABA), and JD.com (NASDAQ: JD). However, investors should consider a few key points before blindly dumping all their Chinese stocks.